The market just published an unhealthy comparison between the AOL bubble and Time Warner.

This week’s earnings details included some high-profile valuation calculations for high-growth, high-tech, high-risk companies. Ford and Amazon write off shares of electric car maker Rivian; Alphabet and Microsoft are seeing a decline in the value of some stocks. But the valuation hit that has been the biggest, and in its own microcosmic sense, may speak loudest about the past decade of dot-com-like growth in the value of tech startups, comes from the healthcare sector.

Health care was the main focus of trade in the pandemic market. This may seem obvious: a world facing a global health crisis that has brought its economy to a standstill should recognize the need to increase investment in health care. There were big winners whose business was directly linked to the risk of the pandemic and whose investors proved their foresight worth: Moderna Therapeutics. But at a broader level of the stock market, digital health trading has been a stay-at-home stock that has shown huge gains as telemedicine boomed, requiring patients to seek medical care virtually, and as digital services rolled out across sectors. years of evolution in a few months.

This topic looks weak right now, and the business models these disruptors plan to use to turn pandemic games into long-term health winners are less reliable. Much of tech, from the enterprise cloud to biotech to fintech, has been hit since last fall, but this week’s catastrophic earnings from telehealth leader Teladoc marked the lowest point for the medical version of this recent tech bubble. After a more than $6 billion charge related to its acquisition of chronic disease company Livongo, Teladoc’s shares have fallen and are now down more than 80% year-over-year. Its 40% drop on Thursday sharply eased what had been a year-long train wreck for public digital health assessments: rivals AmWell and 1Life Healthcare fell more than 80% last year, and consumer healthcare company Him and Hers Health fell more than by 60%.

AmWell’s investors included Google, which invested $100 million in the company in 2020.

The US$6.6 billion impairment loss is excluded from earnings figures, but it is a big success that is directly related to how Teladoc planned to turn its home trading bridge into a post-pandemic business. Teladoc bought Livongo for $18.5 billion in cash and stock at the end of 2020 in the largest digital health deal to date.

To give you an idea of ​​how severe the $6.6 billion impairment loss is: after Thursday’s stock plunge, it was larger than Teladoc’s market capitalization.

Bob Pisani of CNBC pointed to an ominous market parallel: AOL-Time Warner. In the year following the deal, the combined company’s biggest headlines were not about synergy, but about “damaging goodwill” as the value of the original milestone of the deal with the dot-com bubble, AOL, plummeted.

AOL-Time Warner’s write-off was many times the size of Teladoc (before and after its collapse). But the collateral damage from the Teladoc disaster extends to a recent era of disruptive investments and one of its star stock raisers: ARK Invest’s Cathy Wood, who was one of the few funds to invest in Teladoc’s falling knife earlier this year and has grown into the largest shareholder. . It was the third-largest holding in her largest fund behind Tesla and another home-based game: Zoom Video Communications.

Wood’s fund doesn’t stop buying more Teladoc on Thursday. But in a sign of just how much has come from the breakout theme of trading, its flagship innovation fund, ARK, has now suffered a fate familiar to the vast majority of investment management peers, even those fresh off the ground: it no longer outperforms the S&P 500 since his creation. For any investor who survived the dot-com bubble and is old enough, or whose parents are old enough, to be convinced of the need to move from fixed assets to sector funds betting on medical sciences, telecommunications and technology, the lessons should have been learned. learned a long time ago.

The big problem for Teladoc is not only that she, Livongo and others are just going through a reset period before climbing higher again, but whether cracks in the foundation of her business model are showing up as the euphoria from the pandemic is weakening. Wall Street, which divested from stocks on Thursday morning, is concerned as one analyst writes of “cracks in the entire foundation of TDOC’s health as increased competition weighs on growth and profitability.”

And Wall Street notes that these cracks are occurring precisely in areas where Teladoc planned to move beyond a commercialized core telemedicine service, into a direct-to-consumer mental health space, and into the Livongo chronic disease space, which was expected as a growth drivers over the next three years.

“While we are in no hurry to make radical changes to our thesis based on one bad quarter, we doubt competitive headwinds will die down anytime soon,” wrote one analyst who downgraded the stock.

The employers’ focus on wellness has been seen as a tailwind for the sector, but there are now growing doubts about how much corporate buyers will pay for these services. Sales cycles are being sidelined, and employers who pay very high wages and face labor shortages are overestimating their costs. “Human resources departments are overwhelmed because there is so much going on with regards to returning to the office, resolving the Great Retirement, and all the hiring and allocation of resources to attract and retain talent,” said Teladoc CEO Jason Gorevich.

The write-off of Rivian shares this week speaks to what seemed logical enough in the bubble talk after investors invested in EV stock. Valuation returns often reflect one element of what creates a bubble: an imbalance between the supply of a particular investment desire and demand, and market bubbles form when too much money is put into working in a particular area where there is not enough supply. Rivian was one of the few public market options to bet on non-Tesla electric vehicles.

But digital health is overcrowded with players, not just trade, which Teladoc cites in its earnings. “We are seeing customers being flooded with a number of new smaller point solutions, which has created a buzz in the market,” Gorevich said.

That’s why companies like Teladoc have been actively looking to expand their M&A services, such as the Livongo deal. Castlight Health has teamed up with Vera Whole Health. Virgin Pulse has teamed up with Welltok. Accolade bought PlushCare. Grand Rounds and Doctors on Demand have teamed up. They also face a monstrous threat from Amazon, which this year began incorporating its medical services into corporate plans at the national level. The bundling of highly valued digital health companies could have resulted in valuations well ahead of proof that deals will work in a market that is under pressure from all sides.

Gorevich told Wall Street analysts that he is convinced Teladoc’s “whole man” strategy is the right one and it may take longer to see the funnel turn into sales and more deals could be through insurance partners rather than through direct corporate purchases. Teladoc is without a doubt the leader in its market. But its CEO also admitted: “It is still on the verge of completing the integration, we have no proof. So people are waiting and wanting to see, and early adopters are buying, but we haven’t reached much of the market yet.”

Or, in other words, the results of the analyzes have not yet been received from the laboratory. Investors, unlike patients, do not have to wait.

—Ari Levy of CNBC contributed to this report.